NovaDel Pharma Inc (NVD) filed Quarterly Report for the period ended 2009-06-30.
NovaDel Pharma Inc. is a specialty pharmaceutical company that develops novel drug delivery systems for prescription and over-the-counter drugs. The Company\'s proprietary lingual spray technology delivery system offers the patient (i) fast onset of action; (ii) improved drug safety by reducing the required drug dosage and reducing side effects; (iii) improved patient convenience and compliance; and (iv) enhanced dosage reliability. NovaDel Pharma Inc has a market cap of $15.9 million; its shares were traded at around $0.26 with and P/S ratio of 43.8.
Highlight of Business Operations:
We have had a history of recurring losses, giving rise to an accumulated deficit as of June 30, 2009 of $79,029,000, as compared to $74,829,000 as of December 31, 2008. We have had negative cash flow from operating activities of $2,788,000 and $2,749,000 for the six months ended June 30, 2009 and 2008, respectively. As of June 30, 2009, we had negative working capital of $3,622,000, as compared to $47,000 as of December 31, 2008, representing a net decrease in working capital of approximately $3,575,000.
Despite this reduction in expenditures for clinical activities, we require capital to sustain our existing organization until such time as clinical activities can be resumed. We received $1,475,000 in gross proceeds on May 30, 2008 from the initial closing of a convertible note financing with certain funds affiliated with ProQuest Investments, and received $2,525,000 in gross proceeds on October 17, 2008, from the subsequent closing of such convertible note financing, collectively referred to herein as the 2008 Financing. The convertible notes issued in the initial closing matured on November 30, 2008 and, in the subsequent closing, matured on April 17, 2009. On November 30, 2008, with respect to the initial closing and on April 17, 2009, with respect to the subsequent closing, the noteholders did not convert the convertible notes issued in such closing into shares of common stock or demand payment of the outstanding principal balance, plus accrued and unpaid interest at a rate of 10% per annum. There can be no assurance whether the noteholders will convert their notes or demand immediate repayment of the convertible notes at maturity. The convertible notes are secured by all of our assets, other than certain excluded assets. During the second quarter of 2008, we also entered into a European partnership for our ondansetron oral spray with BioAlliance, as a result of which we received an immediate non-refundable license fee of $3,000,000.
We are seeking to raise additional capital in 2009 to fund future development activities through a license agreement or by taking advantage of other strategic opportunities. These opportunities could include the securing of funds through new strategic partnerships or collaborations, the sale of common stock or other equity securities or the issuance of debt. In the event we do not enter into a license agreement or other strategic transaction in which we receive an upfront fee or payment, or we do not undertake a financing of debt or equity securities, we may not have sufficient cash on hand to fund operations. We can give no assurances that we will be able to enter into a strategic transaction or raise any additional capital or if we do, that such additional capital will be sufficient to meet our needs, or on terms favorable to us. Our ability to fund operations is also dependent on whether ProQuest Investments, or ProQuest, to which we have $3.0 million of outstanding secured convertible notes relating to fiscal 2008, now consist of $.5 million of notes issued in the initial closing on May 30, 2008, the Initial Closing Notes, and $2.5 million of notes issued in the subsequent closing on October 17, 2008, the Subsequent Closing Notes, demands payment under such notes. This reflects $1.0 million payment made to ProQuest Investments on April 29, 2009. Given our current level of spending, if ProQuest demands payment under the Initial Closing Notes and the Subsequent Closing Notes, we will not be able to repay the notes in full, unless we are successful prior to that time in securing funds through new strategic partnerships and/or the sale of common stock or other securities. However, if ProQuest demands payment under the Initial Closing Notes and under the Subsequent Closing notes and we are not successful in securing new funds, we will not have sufficient cash on hand to fund operations. If ProQuest fully converts the Initial Closing Notes and Subsequent Closing notes into shares of our common stock, and we are not successful in securing new funds, we will have sufficient cash on hand to fund operations through third quarter 2009.
Our audited financial statements for the fiscal year ended December 31, 2008 were prepared under the assumption that we will continue our operations as a going concern. We were incorporated in 1982, and have a history of losses. As a result, our independent registered public accounting firm in their audit report has expressed substantial doubt about our ability to continue as a going concern. We believe that the cash inflows that have been generated from the 2008 Financing, along with the $3,000,000 non-refundable license fee received from BioAlliance, the recent Common Stock Purchase Agreement (the "Agreement") with Seaside 88, LP ("Seaside") relating to the offering and sale of a total of up to 13,000,000 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share (the "Common Stock") (the Offering”) and any additional potential cash inflows that may be received during 2009, will improve our ability to continue our operations as a going concern. Continued operations are dependent on our ability to complete equity or debt formation activities or to generate profitable operations. Such capital formation activities may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.
In addition, as of June 30, 2009, we are no longer in compliance with Section 1003(a)(ii) of the NYSE Amex LLC Company Guide with stockholders’ equity of less than $4,000,000 and losses from continuing operations and net losses in three of our four most recent fiscal years; and Section 1003(a)(i) of the NYSE Amex LLC Company Guide with stockholders’ equity of less than $2,000,000 and losses from continuing operations and net losses in two of our three most recent fiscal years. However, as previously noted, the plan that we submitted to the NYSE Amex LLC on June 13, 2008 reasonably demonstrates our ability to attain a stockholders’ equity of $6,000,000 or above by no later than November 16, 2009, which will also address the deficiencies noted in Section 1003(a)(ii) and Section 1003(a)(i).
On May 19, 2008, we entered into an agreement with BioAlliance Pharma S.A., whereby BioAlliance acquired the European rights for our ondansetron oral spray. Under the terms of the agreement, BioAlliance paid us a license fee of $3,000,000 upon closing. We are eligible for additional milestone payments totaling approximately $24 million (an approval milestone of $5,000,000 and sales-related milestone payments of approximately $19 million) as well as a royalty on net sales. We anticipate collaborating with BioAlliance in the completion of development activities for Europe, with BioAlliance responsible for regulatory and pricing approvals and then commercialization throughout Europe. We will be responsible for supplying the product.
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